Holiday Cottages available to book direct from the owner.
Furnished Holiday Lets. The tax benefits
Furnished Holiday Lets (FHL) benefit from a range of tax reliefs which are not available to other types of property letting. The tax reliefs apply to qualifying properties in the UK, and the European Economic Area
In very broad terms, furnished holiday accommodation is treated as a trade for some tax purposes, meaning reliefs that are not available for normal residential lets are available for FHL’s.
The tax reliefs available include;
The possibility of claiming capital allowances, which can result in tax relief on items such as the cost of electrical fittings, heating, kitchens and bathrooms, and white goods. The current level of immediate relief (the Annual Allowance or AIA) is up to £500,000, though this limit is regularly altered by the government. If the AIA is not available (or the limit is exceed) annual relief is available at 18% or 8% depending on the nature of expenditure.
In qualifying circumstances, there is the potential to claim Entrepreneurs relief on the sale of the property (resulting in a tax rate on any gain of 10% rather than the usual 28%).
The ability to “roll over” any gain on the sale of the property – so if one FHL is sold, and another purchased within certain time periods, no capital gains tax is payable.
The ability to “hold over” a gain on the property, meaning the property can be gifted to family or friends without any Capital Gains Tax being payable (though in some circumstances consideration needs to be given to Inheritance tax which may be payable if gifts are made within 7 years of death of the donor)
Broadly, to qualify as a FHL;
The property must be available for commercial letting to the general public for at least 210 days in the year.
The property must actually be let for 105 days in the period.
The property cannot be let to the same person for more than 31 days.
These tax benefits can make owning a FHL an attractive investment from a tax perspective, but as ever with tax the devil is in the detail of the rules. If you would like to explore if these reliefs may be available for your property please do not hesitate to contact Baines Jewitt at info@bainesjewitt.co.uk, or on 01642 632032.
Leave a Reply
You must be logged in to post a comment.